Every month I report on the latest unemployment data, the number of people claiming JSA and the number of vacancies in each Local Authority. The last set of data showed that there are as many as 20 people chasing the one vacancy in some areas, in Lewisham there are almost thirty five dole claimants chasing each vacancy.

To download full analysis       

This is using the claimant count only; the number of people unemployed is significantly higher if we used the ILO definition of unemployment, as many unemployed people are not claiming JSA. Currently there are 2.68 million people unemployed using this definition, and there are 463,000 vacancies, and around 6 people chasing every vacancy.

If we look at the same areas pre- recession, what do we see ? Significantly lower levels of unemployment and higher number of vacancies. So what has caused the change in numbers ? Not unwillingness to apply for jobs but the deepest recession we have had since the 1930′s, which has not just affected unemployment in the UK but globally. There are one million more unemployed people than there was 4 years ago. It is time for the Government to stop blaming the unemployed for their situation and to start taking responsibility for creating jobs.

The BLS provides tables for the USA and nine other countries America compares itself with, one of which is the UK. The most usable figures are those that translate each set of national figures into US definitions. This means they’re not quite the figures we’re used to talking about in this country, but it’s the relative position we’re interested in here, so that doesn’t matter so much. Our unemployment rate is still a little lower than America’s and Italy’s, and significantly lower than France’s:(*)

Our unemployment rate is usually higher than Japan’s, but it is a little depressing to find ourselves lagging some of the other countries so badly. What’s much more interesting, though, is how these countries have coped with the impact of the global recession on their labour markets: (*)

This table may actually paint our position in too rosy a light. America’s bigger increase in unemployment reflects the massive loss of jobs that took place in 2008 and 2009, that picture is improving very slowly and UK unemployment may rise higher than America’s:

The National Institute for Economic and Social Research’s gloomy forecast for UK unemployment suggests that that upswing at the end of the chart above is more than a blip:

the output gap will be closed only very slowly, with unemployment rising to about 9 per cent this year and remaining high throughout the forecast period. Even in 2014, it will still be over 7 per cent, compared to the OBR’s estimate that the structural unemployment rate is about 5.25 per cent. Unemployment at this elevated level for such a long period is likely to do permanent damage to the supply side of the economy, with large long-run economic costs.

On his Not the Treasury View blog, Jonathan Portes, the Institute’s Director, has drawn attention to “the largest and longest unemployment gap since WWII“. The unemployment gap is the difference between actual unemployment and structural unemployment (here labelled the ‘NAIRU’ – the non-accelerating inflation rate of unemployment):

He points out that the unemployment gap is a measure of the amount of unemployment due to macro-economic conditions:

In other words, if macroeconomic policy is broadly on track, the unemployment gap should be small; it is a measure of the number of people who are not working because macro policy isn’t either.

(Double emphasis in original.) Jonathan notes that we don’t have the high inflation that might normally explain such a gap. He draws one encouraging conclusion from it – that there is more spare capacity in the economy than is sometimes claimed, and so more room for fiscal expansion. But this also means that if we don’t do anything about cyclical unemployment it will become a huge weight of structural unemployment – the spare capacity will drain away.

In other words, if we accept a persistently high level of cyclical unemployment now, we will condemn ourselves to a persistently high level of structural unemployment in the future.

The days when Britain could lecture the rest of the world about labour market success are behind us. Austerity has not served Britain’s unemployed workers well and we are on the verge of creating a structural problem that could take a generation to solve.

(*) The BLS data stretches to the fourth quarter of 2011 for all the countries in these tables except the United Kingdom. I have used the 3rd quarter figure instead.

King’s argument was that inflation had been kept high by the rise in VAT, higher import prices and soaring energy costs.

“The consequence has been a ferocious squeeze in the purchasing power of take home pay. That led to a fall in consumer spending which accounted for much of the weakness in growth in 2011″

Mervyn King points out that consumer demand fell by a full 5% in 2008. He might have chosen to add that it has continued to fall more slowly and that it is not expected to return to stronger growth until at least 2013.

So there we have it, just as the TUC suspected, we have become stuck in recession because we have not had big enough pay rises.

This is a serious problem, because at the level of the individual firm it might superficially seem quite logical to pay as little as possible in hard times, but the net result will be that the economy gets stuck in a vicious circle of low demand. The Government has no appetite for coordinated action to increase wages – and doubly so in the public sector – but that is exactly what is needed now if we are going to kick start the economy.

This is not just pie in the sky, as the money is alreday there to use in most of the bigger companies. It is a little known fact that the UK’s corporate sector is sitting on an ever greater pile of financial reserves rather than investing and spending. Once we get a firm recovery going, that money could be unlocked and flow into the economy quite quickly – but this can’t be done while real pay is falling.

Turning back finally to last night’s “state of the economy” speech, there are quite a few matters where Mr King’s analysis of what is needed differed from my view, but I will gladly give him the last word on a point where he is absolutely correct:

“The legitimacy of a market economy will inevitably be challenged if rewards go disproportionately to a small elite”.

This view is an insult to the 2.68 million people who are unemployed and looking for work. There are 463,000 jobs available in the economy (down 18,000 on last year and down 34% on pre-recession levels).* There are over one million more unemployed people looking for employment than there were four years ago. The ratio of unemployed people to jobs currently 5.8. Factor in the far from perfect match between the geographical locations (see Anjum’s regular round up of the areas of the UK where there are as many as 32 claimants for every available post) and skills profiles of jobs and claimants, and that family committments mean the hours of work offered won’t fit with the caring responsibilities of every unemployed worker, and the picture becomes even bleaker.  It is simply not feasible for everyone who is out of work to find employment.

Those who are unemployed are not ‘failing to do the right thing’. They are, in the main, desperately seeking employment (and any who are not will quickly be denied benefits under current, extremely strict, JSA rules). The benefit cap (which, incidentally, will also hit those who aren’t even required under current benefit rules to be actively seeking employment) will do nothing to help them, and where people have to move from jobs rich to more deprived areas it is likely to make their efforts even harder. To moralise about unemployment when the labour market is in the weakest position is has been for 17 years is simply offensive.

*Of course the vacancy level is net, but so is the unemployment total, so while there will, of course, be more vacancies over the course of every month than the net figure suggests, this is also true of the number of unemployed people.

370,000 migrants on the dole

On the one hand, the paper plays up “concerns that the country has become a destination for ‘benefit tourists’”. Then, towards the end of the article, there is equal outrage at the fact that “90 percent of new jobs created in Britain over the past decade have gone to foreign -born workers.”

All those arguments where you ended up asking “are you angry because they have got jobs or because they haven’t?” It’s like being back in my twenties. It’s worth paying some attention to the methodology of the DWP reporton which this story is based: the Department has used National Insurance numbers to identify people on benefits who were non-UK nationals at the point when they registered for National Insurance numbers. The authors of the report go out of their way to highlight the fact that

these statistics do not provide a measure of non-UK nationals currently claiming benefits based on their current nationality. (Emphasis in original)

In other words, many of these claimants could well have been UK citizens for a number of years. The researchers took a random sample of 9,000 of these claimants, matched their details with Borders Agency records, and found that 54 per cent had been granted British citizenship.

And, with a bit of thought, surely most people will conclude that even the non-British citizens should have rights to benefit. Chris Grayling and Damian Greenaccept this (begrudgingly) in a comment piece also published today in the Telegraph:

There’s a natural instinct that says that no one from other countries should receive benefits at all. But if someone works and pays taxes here, it’s not unreasonable that we should help out if they fall on hard times.  But we have to have a system that is fair and transparent, and which stops people receiving money that they should not be entitled to.

But who is receiving money they should not be entitled to? In the Telegraph article you have to wait till paragraph 13 before you read:

In the majority of cases, ministers found that the migrants claiming benefits were eligible for the money. In a small sample group, details from a quarter of claimants could not be verified, while 2 per cent of them were suspected of making fraudulent claims. (My emphasis.)

Despite the Telegraph’s headline, the 371,000 claimants are not all on Jobseeker’s Allowance; the figure is for all “working age” benefits. The relevant figure for JSA is 121.7 thousand, which is less of a scary number. Claimants in this group who are on JSA are, in fact, outnumbered by disabled people:

• JSA – 121,700
• Employment and Support Allowance and incapacity benefits – 130,400
• Lone parents – 53,900
• Carers – 33,500
• Other income-related – 10,900
• Disabled 14,100
• Bereaved – 6,500

Finally, the media coverage does not highlight the fact that migrants are, in fact, substantially less likely to claim benefits than native British people:

As at February 2011, 16.6% of working age UK nationals were claiming a DWP working age benefit compared to 6.6% of working age non-UK nationals.

So, what the DWP’s research actually reveals is:

• Foreign born people are less likely to claim benefits than others.
• Most people on benefits who were foreigners when they first came here are probably British citizens now.
• Nearly all of them only claim benefits they are entitled to.
• And most of them aren’t on the dole.

I think I can live with all that.

The January labour market figures are terrible – the unemployment statistics look more and more like what we got used to in the 1980s. But, at first sight, it’s encouraging that the number of people in work went up a little. I’ve recorded a quick video to explain why this picture is misleading.

Perhaps the Chancellor is just toying with the idea of tweaking around the edges of the public sector pay scales.  Certainly to push for full localisation would be foolhardy, as it would cause significant detrimental economic side effects and would be likely to lead to the Government having much less control over the public sector pay bill.

The main risk is that the less well-off regions and nations of the UK would be made poorer by localisation. Columnist Chris Giles was making the case for localisation  in the FT today, but he admits with cutting irony that:

“cutting public sector pay in poor areas is as likely to generate local dynamism as the austerity measures currently imposed on Greece.”

Second, the mechanisms needed for local bargaining would not be very efficient.  National bargaining brings economies of scale to public sector pay setting. Local bargaining would mean committing significant extra resources. For example, the NHS has 161 acute hospital trusts. Each of these would have to gather labour market intelligence, draw up a negotiating position, hold a number of negotiating meetings involving senior staff, and set up new pay-roll systems and so-on.

Significant differences in pay between localities, regions and nations would also provide an incentive for public servants to migrate away from the poorest areas, causing new skill shortages.

Localising pay might well also reignite the legal battles over equal pay, with all the expense and uncertainty that would entail.

Perhaps most worryingly for the Government though, genuine localisation of public sector pay would take a great degree of control away from the chancellor. Local determination is not compatible with pay freezes and caps.

Furthermore, although local market pressures may bear down on public sector pay in a recession,  what would happen in a boom? The answer is likely to be that trade unions would be very astute about playing off public sector  employers against each other in negotiations, as the bargaining “game” would then become a contest between national unions with full-time negotiators and local employers . The process of ramping up settlements by singling out the weakest employers first is known in industrial relations jargon as “whipsawing”. This could well lead to the overall public sector pay bill rising more quickly.

This strategy might benefit some public sector workers, but this would be to some extent at the expense of others. Unions do not pursue  this route now as it would simply be unfair .

The overall outcome would be that those who live in rich regions would get richer whilst those in poorer areas would lag even further behind – simply the antithesis of us “all being in it together”.

There seems to be some reason for optimism in the fact that employment also went up – admittedly, by just 18,000, but that is better than a fall.

Unfortunately, as I show in my post, the improvement in employment is largely due to increases in part-time and self-employment. The number of employees working full-time fell by 140,000. 

The increase in self-employment wouldn’t be a problem if it indicated a burst of new entrepreneurship – or was even just an increase in people living out their dream of being their own boss. But a whole series of indicators suggest that the labour market is actually very soft: the outlook for insecure workers and people looking for jobs is grim. 

Top 10 employment blackspots:

Download full analysis       

The top 10 ten employment blackspots for young people (18-24 only) based on the claimant count figures released today are:

Youth unemployment continues to be the highest in Blaenau Gwent and Hartlepool.

Download full analysis for every area         

Source ONS nomis – Dec 2011 data

The same European trend is visible if we confine ourselves to the period since the start of the recession. But the increase since the start of 2008 has been more marked in the United Kingdom:

There’s an even stronger contrast if we look at temporary employment. If we look at the last 14 years, the proportion of workers in temporary employment has actually fallen in the UK, but risen in Europe as a whole:

But if we just look at the period since the start of the recession, this pattern is reversed:

This country still has a high(ish) employment rate by European standards (see below) but these figures suggest part of the price workers have paid to maintain that position.

European employment rates

• Iceland 79.7
• Switzerland 79.4
• Norway 75.2
• Netherlands 74.7
• Sweden 74.5
• Denmark 73.5
• Germany 72.5
• Austria 72.1
• Finland 70.1
• United Kingdom 69.4
• Cyprus 69.0
• Czech Republic 65.7
• Portugal 64.8
• Slovenia 64.4
• Estonia 64.3
• France 64.1
• Luxembourg 63.8
• Belgium 62.5
• Latvia 61.4
• Lithuania 60.8
• Poland 59.7
• Slovakia 59.6
• Ireland 59.5
• Romania 58.8
• Spain 58.3
• Bulgaria 58.2
• Italy 57.3
• Malta 57.3
• Greece 56.4
• Hungary 55.8
• Croatia 52.3
• Turkey 49.2
• Macedonia 43.7

The number of long-term dole claimants over the Christmas period has more than doubled from 122,000 in 2007 to 279,000 today. Last Christmas, 243,000 people had been out of work for at least a year.

Scotland (+28%) and London (+24%) have had the sharpest increase in long-term dole claimants since last year. Eight of the ten local authorities with the fastest increase in long-term claimants are in Scotland.

Hounslow has experienced the sharpest increase in the UK, with the number of people in the London borough set to spend another Christmas on the dole more than doubling to over 500.

The analysis shows that rising long-term unemployment is a problem throughout the country. In the last Christmas before the recession, 29 local authorities had at least 1,000 people claiming Jobseeker’s Allowance (JSA) for at least a year. This figure rose to 88 local authorities last year and now 105 local authorities have over 1,000 long-term dole claimants, including 14 who have at least 3,000 people who been claiming JSA for at least a year.

The number of people spending their third successive Christmas on the dole has also increased by a third on last year, with 75,000 people currently on JSA for at least two years.

The TUC is particularly concerned about rising long-term unemployment as it can permanently scar people’s career prospects and negatively affect their health.

Number of people claiming Jobseekers’ Allowance for at least 12 months by region 

Fastest increases in long-term unemployment by local authority, 2010-11 

Source: nomisweb

To download full analysis click here

Today’s data reveals that over the first year of its operation 3,345 employers have taken advantage of the scheme (1% of the total anticipated number) and that the NICS holiday has been claimed for 12,411 employees (2% of the anticipated number of jobs).

What’s more in the region that currently has the highest unemployment rate (the North East where unemployment is 11.7%) only 587 employers have used the scheme, supporting 571 jobs.  To put this in some context over the same period of time the unemployment level in the NE has risen by 24,000 and the employment level has fallen by 23,000.

Far from “ensuring all parts of our country contribute to a more balanced and sustainable economic future” this scheme has created barely no jobs – as we predicted at the time. But with unemployment now at 2.63 million there is no pleasure in saying we told you so.

It is true that between Jan-March 2010 and July-September 2011 (the figures released today) private sector employment levels role by 581,000. But 54% of the rise (314,000 jobs) took place between Jan-March 2010 and April – June 2010, and the election was in May. It is fair to assume that at least a third of the change in private sector job levels took place in April 2010, and given the Government wasn’t formed until the 12th of May, it’s hard to see how the Prime Minister can take responsibility for jobs change over that month, before any of his policies had been agreed.

A far fairer and more accurate assessment would be to look at change in employment levels from April – June 2010 (the actual period in which the election took place, rather than the three months before it) to now. That shows that 267,000 private sector jobs have been created, and 305,000 public sector posts have been lost.

On balance, you can see why the Prime Minister has chosen to move his starting date backwards.

Top 10 employment blackspots  

Download analysis for every area

The top ten employment blackspots for young people (18-24 only) based on the claimant count figures released today are:

Blaenau Gwent is again the employment blackspot for 18-24 year olds.

Download full analysis for every area

TUC analysis published last month showed that youth claimant unemployment had increased in 97% of local authority areas in the UK in the last 12 months. The number of young people aged between 18 and 24 unable to find work in the UK had increased in 196 of 202 local authorities since September 2010.

The analysis shows that as unemployment rises and the number of job vacancies fall, a growing proportion of unemployed people are staying on the dole for over six months, and this is affecting low-paid workers more than others.

The number of dole claimants out of work for over six months has increased by around a third since the start of the recession, rising from 29% in April 2008 to 40% in October 2011. Currently around one in six dole claimants have now been out of work for over a year.

The risk of becoming long-term unemployed has increased most for machine operators, with the number of long-term dole claimants rising from 29% before the recession to 45% in October this year. People from elementary occupations – which includes jobs like cleaners, catering assistants and security guards – have had the second sharpest increase, with 46% of them now having been on the dole for at least six months.

Dole claimants from professional occupations have seen barely any change in the length of time they are spending out of work, with the proportion of those on the dole who have been unemployed over six months falling slightly since the recession to 29%.

Before the recession the risk of long-term unemployment did not vary greatly between occupations, with one in four (25%) unemployed managers on the dole for over six months, compared to one in three (31%) of those from elementary occupations.However, this gap has grown over the recession and lower-paid occupations are now experiencing the sharpest rise in the risk of long-term unemployment.

Out of work people from lower paid occupations such as cleaners, machine operators and sales assistants have a far greater risk of becoming long-term unemployed than those from higher-paid occupations such as managers, senior officials and professional occupations such as engineers, teachers and solicitors.

The TUC is particularly concerned about rising long-term unemployment as it can permanently scar people’s job prospects, both through long spells of unemployment and because they often have to work below their skill level.

The TUC is calling on the government to provide greater support for those out of work for six months or more as it believes the current policy of only providing help after 12 months could come too late for many.

Unemployed workers on the dole for over six months by occupation

Source: nomisweb, Annual Survey of Hours and Earnings 2011

The figures are based on UK claimant count, and the full TUC analysis is available as an Excel spreadsheet

Reforming severance pay, published by the Bank’s Social Protection and Labour Unit, suggests that unemployment benefit is all that redundant workers need, although it accepts that, if employers and unions choose to negotiate redundancy pay, that could still be acceptable (that’s big of them!)

But as Peter Bakvis of the ITUC/Global Unions’ Washington Office comments:

Curiously, despite its radical proposals for eliminating or scaling down severance pay programmes, Reforming Severance Pay states that the research carried out for the book found little evidence of negative impacts on labour market outcomes, particularly ‘in the few studies that isolate the severance pay impact’.

The report itself says:

While proponents argue that flexicurity increases productivity and employment without  sacrificing employment security or hurting vulnerable groups, the evidence relating to productivity effects is tenuous. After all, greater labor mobility and associated worker dislocations surely cannot be viewed as a goal per se but rather as a means to promote productivity. More research into the effects and particular channels of productivity effects is needed.

Presumably, such research will continue to be sought, until the facts get it right….

So far removed from all that we went through
And I tread a troubled track
My odds are stacked I’ll go back to black

In these few short words, Amy Winehouse sang of the distance between her and her experiences. Perhaps consumed by what Churchill called ‘the black dog’ of depression, she sang ‘I’ll go back o black’. It could be, however, that it’s the work of Dame Carol Black we need to go back to, her Review of the Health of the Working-age Population from 2008.

Dame Carol is the Government’s czar on the health of the working age population, and it’s her ultimate goal that everyone should have access to work-related health support. Amy Winehouse famously sang that she didn’t want to go to rehab, but of course her legions of fans and well-wishers did want her to go. Many people may think that rehab is simply for the drink or drug problems of the rich and famous, but that’s because for most employees there is no vocational rehabilitation available to them. Vocational rehabilitation is simply whatever helps someone with a health problem to stay at, return to or remain in work:

an idea and an approach as much as an intervention or a service.

Sometimes that intervention can be as simple as saying “Stop – don’t resign, lets find out if anything can be done”.

Yet even that simple service fails to be delivered.

The result is that people of working age losing their sight are commonly also losing their jobs. Neither they nor their employers realise there is any other option. The good news is that, with her encouragement, RNIB has risen to Black’s challenge. A report on the business case for vocational rehabilitation has now been published by the RNIB Group. Vocational rehabilitation: The business case for retaining newly disabled staff).

The cost-benefit ratio was found to be never less than 2.5:1. The ratio is significant, in that it exceeds the ratio used as the threshold for justifying new regulation, or the threshold used for sanctioning investment in state-sponsored infrastructure such as road building. The information contained is designed to support businesses or the affected employees to do the calculations themselves.

The findings have some long-term implications for the success of Government policy too. Firstly, with the state retirement age set to increase there will be more disabled people in the workforce. Secondly the providers of employment support are rewarded not just for achieving job outcomes but for keeping people in work too meaning that they may also look to Government for more support on job retention.